Negotiating in the Time of COVID
As a business lawyer, I’m used to receiving frantic calls at all hours about any number of business issues, from the mundane to the bizarre. But over the past eight weeks, as PPP has run out and many business owners and CEOs are facing seemingly insurmountable challenges, these calls have overwhelmingly focused on one topic: business divorce.
Due to the prolonged economic disruption of COVID-19, the reality is that many business partnerships will disband. Whether you’re buying out a partner, want to sell your interest, or close up shop and move on, the goal is to do so in a way that maximizes the value of the hard work you’ve put into the business. Since I’ve been spending my days navigating these issues with clients, I’m sharing some tips here to help you negotiate with your business partner to part ways as productively as possible.
1. Recognize that “it’s not personal, it’s strictly business”
This tip from The Godfather is also known as “get your head in the right place.” When you’ve built a business with someone, separating the emotion from business decisions is extremely difficult, especially when it comes to splitting up. But it’s critical to try. The decision to “break up” is likely one of the most important of your life, and you can’t make sound decisions if you view the economic realities as a personal affront. Talk through your feelings with someone you trust – scream if you have to – but take the emotions out of the decision-making process as best you can.
2. Use a trusted advisor as a sounding board.
Of course, you’ll need legal counsel to draw up the documents memorializing the business divorce. But before you get there – and to help keep your emotions in check – bounce ideas off someone you trust. This can be a business advisor, such as a lawyer, accountant, financial advisor, or even a business mentor, or someone you can confide in with personal matters, such as a therapist, friend, or family member. As a business owner, you live and breathe your business – sometimes so deeply that seeing the big picture can be difficult. Using a trusted advisor can help keep you focused and consider scenarios you wouldn’t have otherwise thought about.
Take the time to consider your business partner’s interests and positions. Being able to empathize with the other party’s perspective is critical to achieving a good result. By suppressing your automatic reaction of anger or fear, you can better understand what he or she is seeking. (Remember, empathy isn’t sympathy. The key is to demonstrate that you understand how the person feels, but you’re not necessarily agreeing with it.) This understanding puts you in a much stronger negotiation position as you’ll be better able to craft win-not lose solutions.
4. Start at the end.
What resolution do you envision? Rather than preparing a negotiation script in which you’re just reacting (i.e., “If she says this, I’ll respond with this”), picture your ideal scenario, and work backwards to see what it will take to get there. Do you want your business partner to sell you her shares? Consider what her take will be on how much blood, sweat, and tears she’s put in over the years (not how much you think she’s put in) and consider ways to respond to that. Perhaps you can provide value to her in ways other than an inflated buyout price – loan forgiveness, equipment, and so forth. By starting at your desired result and pressing rewind, you’ll make more progress than if you simply script out a response to your adversary’s anticipated comments. That strategy won’t get you anywhere.
As a business lawyer and experienced negotiator who has spent my career helping business owners navigate these issues, I know firsthand that business divorces are high-stakes negotiations peppered with emotions and stress. But don’t let fear prevent you from pursuing what you want. The business environment we find ourselves in today is unprecedented, but may be just the opportunity you need to move forward.